Question

Problem 5 Sakelaris Corporation makes a product with the following standard costs: Standard Quantity or Hours Standard Price or Rate Direct materials 8.6 kilos $6.00 per kilo Direct labor 0.4 hours $11.00 per hour Variable overhead 0.4 hours $5.00 per hour The company reported the following results concerning this product in August uz Actual output Raw materials used in production Purchases of raw materials Actual direct labor-hours Actual cost of raw materials purchases Actual direct labor cost Actual variable overhead cost 8,400 71,750 76,900 3,320 $469,090 $35,524 $17,928 units kilos kilos hours The company applies variable overhead on the basis of direct labor-hours. The direct materials purchases variance is computed when the materials are purchased. Label each variance as favorable (F) or unfavorable (U). Required: a. Compute the materials quantity variance. b. Compute the materials price variance. c. Compute the variable overhead efficiency variance. d. Compute the variable overhead rate variance.

Answer 1

Answers

• Working data

Actual DATA for		8400	units
	Quantity (AQ)	Rate (AR)	Actual Cost
Direct Material	76900	$                   6.10	$        469,090.00
Direct labor	3320	$                10.70	$           35,524.00
Variable Overhead	3320	$                   5.40	$           17,928.00

Standard DATA for		8400	units
	Quantity (SQ)	Rate (SR)	Standard Cost
	[A]	[B]	[A x B]
Direct Material	( 8.6 kilos x 8400 units)=72240 kilos	$                   6.00	$     433,440.00
Direct labor	( 0.4 hours x 8400 units)=3360 hours	$                11.00	$       36,960.00
Variable Overhead	( 0.4 hours x 8400 units)=3360 hours	$                   5.00	$       16,800.00

• Requirement [a]

Material Quantity Variance
(	Standard Quantity	-	Actual Quantity	)	x	Standard Rate
(	72240	-	71750	)	x	$                           6.00
	2940
	Variance		$              2,940.00			Favourable-F

• [b]

Material Price Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Quantity
(	$                                6.00	-	$                       6.10	)	x	76900
	-7690
	Variance		$              7,690.00			Unfavourable-U

• [c]

Variable Overhead Efficiency Variance
(	Standard Hours	-	Actual Hours	)	x	Standard Rate
(	3360	-	3320	)	x	$                           5.00
	200
	Variance		$                  200.00			Favourable-F

• [d]

Variable Overhead Rate Variance
(	Standard Rate	-	Actual Rate	)	x	Actual Labor Hours
(	$                                5.00	-	$                       5.40	)	x	3320
	-1328
	Variance		$              1,328.00			Unfavourable-U